The Latest Spanish Property News from Kyero.com

Investors in Spanish property anticipate a range of benefits as part of a plan to revitalise the economy.

As part of an 11-part plan to boost the Spanish economy, tax breaks are to be given when the cost of renovating a property more than a quarter of its purchase price.

The government has also promised to speed up the way public works are put out to tender and contracts completed, in an effort to revive the construction industry.

In addition, there will be the option of extending mortgages on primary residences for an additional two-year period with no added fees, and 150,000 state-subsidised houses are to be built annually with an emphasis on energy efficiency.

To encourage consumer spending further, Spain’s economy minister Pedro Solbes has proposed a €400-rebate on workers’ personal income tax. A total of 16.4 million employees and self-employed workers, including expats, will receive a rebate of up to €400, dependant on salary. Furthermore, small and medium-sized businesses are to be permitted to apply for monthly rather annual than VAT refunds from 2009, in an effort to enable them to increase their investment activities.

The move that’s likely to make the most difference to British expats is the abolition of Wealth Tax, which will be paid in respect of the year 2007 for the last time.

These announcements provide foreign investors and residents with more incentives to invest in Spain than ever.

Full story from www.homesworldwide.com

Hats off to the developers and promotors in Catalunya for coming up with real-world solutions for the current property market. Reducing off-plan prices by 40% seems like a sensible move to me.

I do hope the G14 developers and promotors are sitting-up and taking notes.

Although the ACd'EI web site is not terribly forthcoming about which properties are available or how to view them, we're trying to get in touch with them to see if we can help clarify the situation and make their properties available to you.

Also in the news this week, a good overview of what's happening in a handful of key property markets around the world. Although the Spanish property market had its own problems before the US sub-prime crisis made matters worse throughout Europe, it's a little comforting to know that the Spanish economy is not alone in its troubles.

In my opinion, this makes the ECB far more focused on finding solutions for Europe rather than treating Spain as an isolated tale of woe.

I had to chuckle reading the story about the economic growth in Madrid. In our tiny corner of Andalucia, there is no such phenomenon. This means that businesses like ours are hindered rather than helped in contributing positively to the economy.

Over the past two weeks we've doubled our office space, cabled and furnished, installed computers and employed new staff - yet we waited three weeks for Telefonica to deign to quote for a new telephone switchboard.

When they did eventually come up with an overcomplicated product at a silly price and an equally silly wait for delivery, I ordered directly from the UK. Spanish economy:0, UK:1. Hey ho.

Our last two articles this week deal with the robustness of Balearic islands property (due to the limited number of off-plan-properties there) and estate agents encouraging property transactions to be conducted in Sterling.

Perhaps looking for a Sterling property deal on the islands would be a good way get the best of both worlds? Now, if those Catalan developers and promoters could also put together a Sterling finance package, that would really be something ..

Martin Dell, Kyero.com

With property prices having fallen over the past year, sales of properties in Catalunya have fallen by a massive 42.7%. As a result many developers are sitting with developments that are either completed but empty or had to cease construction at the midway point.

In a new twist the Corporate Real Estate Business (ACd’EI), which consists of a hundred promoters and developers is offering 2,000 flats at cost price in the Catalunya region, as an outlet for those developers who are struggling or unable to sell their flats at market prices.

The solution that has been devised is that the developer passes on the mortgage on the flat to the buyer. The flats are priced between €120,000 and €180,000 and are being sold at 40% less than the original asking price. The flats are mainly located in the industrial area of Barcelona, and in the counties of Vallès Bages, Baix Ebre (Tarragona), the Camp de Tarragona, Girona and Lleida.

In order to offer these flats the Corporate Real Estate Business (ACd’EI) has reached agreement with various financial institutions on fixing the price of the flat and also on mortgages offered with fixed interest rates at around 5%.

The director of the association, Valentí Oliveras, explained at a press conference that “there are many people interested in buying”, and he assures people that this is a good time, principally because the promoters are more open to lower prices. Additionally, Senor Oliveras went on to announce yet another purchase option, which would allow you to buy the property , however, if you then decided that you did not want to immediately live there, then they (the partnership) would mange the rental for you.

There has also been comprehensive insurance cover arranged should you opt for this option in order to help with any potential problems with a tenant not paying the rent. This is to ensure that the buyer is covered.

Full story from lifestylebarcelona.com

Ten years ago, Chris McCarthy, a Briton living in Marbella, set up Viva Estates, an estate agency aimed at selling property to the hordes of his fellow countrymen keen to buy on the Costa del Sol. At its peak, the company had 15 offices across southern Spain and was selling 2,000 properties a year.

Now, Viva is down to one office and sells 200 homes a year if it is lucky. “It’s as if we’ve been hit by a tsunami,” says McCarthy, who is focusing on Hot Properties, a magazine he has set up to help people sell privately. “The property boom was over by 2004.

Last year, it was oversupplied, overpriced and illegal, then came the Spanish property market collapse, the US sub-prime crisis, Northern Rock, followed by UK house prices falling, rate increases, the mortgage freeze and the stock market collapse. It’s been like wave after wave hitting us.” Spain – and especially the south coast – consistently tops the list of the most popular overseas buying destinations for Britons, with an estimated 65% of the properties sold each year on the Costas going to UK buyers.

With the British market in trouble, the Costa del Sol is feeling the draught. While the value of their own houses in Guildford and Birmingham is at a standstill or even falling, people are less willing to invest in a holiday home abroad. Other places popular with Brits, such as Florida and the Caribbean, are also beginning to hurt.

Even in the south of France and Italy, markets are taking a knock, thanks to the strength of the euro, which has risen 15% against the pound since September, adding to the cost of buying. Couple this with tighter mortgage conditions for borrowers at home and abroad, and the picture is far from rosy.

“There has definitely been a slowdown in the normal sales rates that one might expect,” says James Price, head of international residential development at Knight Frank. “It’s taking longer to get people to commit. There needs to be a compelling reason for them to buy abroad.”

In its latest report on the global market, the agency says the credit crunch is having an impact, but finds it is affecting markets differently according to location and sector.

“Super-prime property appears to be relatively unaffected by the tightening of lending conditions,” says Price, although he thinks even the top end of the market in most countries will begin to slow as turmoil in the financial world hits confidence. He warns: “The next 12 months will see a gradual slowing of price growth in the main international buying destinations, especially France, Italy and the Caribbean.” So what is really happening in the six most popular overseas destinations, and what should you do?

“British demand in Spain has slowed dramatically,” says Mark Stucklin, founder of spanishpropertyinsight.com, an independent online consul-tancy. “The latest nail in the coffin is the exchange rate, and prices have dropped 20% in some parts of the Costas since last summer.” Viva Estates (0800 298 9594, www.vivaestates.com) is selling a two-bed flat in Elvira near Malaga for £240,000, although it is possible to pick one up elsewhere on the Costa del Sol for less than £200,000. In higher-end areas such as Mallorca, prices have stagnated, so vendors who need to sell are having to accept offers.

If you’re an owner, hang on if you can. “Now is not a good time to sell,” says Stucklin. “There are just no buyers out there.” If you must sell, then be prepared to cut the price sharply. Those bringing the proceeds back to Britain can console themselves with the fact they are getting 10p more for each euro than at the beginning of the year. If you’re a buyer, you have a lot of choice, so shop around and haggle hard.

Full story from Times online

Madrid’s local government claims the city’s the best place in Europe to set up an innovative new business. Spain’s capital city is embracing free enterprise in an effort to boost the region’s economy, and it seems to be working.

Madrid's GDP per capita of €27,000 is already 30 per cent higher than the overall European Union average, and is expected to rise in 2008, partly due to the number of new companies starting up in the city and surrounding area.

Last year Madrid’s regional economy grew four per cent – more than double the rate in the rest of Europe, and growth is projected to be just as strong this year.

A large part of this can be attributed to two government agencies, PromoMadrid, which was created in 2004, and Madrid Emprende, which was inaugurated in 2005.

The local government agencies are work to attract foreign investment by assisting entrepreneurs from other parts of Europe, America and the rest of the world with everything from work permits to office space to corporate taxes to commercial real estate.

However, the most important aid is the personal touch, providing introductions to key policy officials in the provincial government and helping newcomers to build up vital relationships.

The agencies are happy to provide in-depth customised kits with answers to everything you need to know, all in English, as well as contacts at local headhunters who will deal with your staffing needs.

However, that’s likely to be the least of your problems, as Madrid’s high quality of life and convenient position in relation to the rest of Europe, the Middle East and North Africa means you’ll have your pick of the talent.

Source www.spainnews.net

The Spanish islands, and in particular the Balearics, comprising Mallorca, Menorca and Ibiza, are not suffering as much as some other parts of Spain since the recent downturn in the property market.

Mark Stucklin, head of investment advice website Spanishpropertyinsight.com, reported recently that areas such as the costas had suffered in recent times from the price correction and the credit crunch, apart from a few "pockets of quality".

He noted that the Balearic islands "have managed to maintain a more upmarket positioning with less off-plan investment type products".

These areas are now being seen as the best survivors in a tough situation.

The property market in Mallorca has already received a boost this year with the announcement that additional low-cost flights are now serving the island from the UK, leading to an increase in visitor numbers – good news for anyone with a holiday home on the island.

Property prices on the island are expected to remain steady due to the fact there is limited land available for new construction, so any existing properties will be in high demand. It is thought somewhere in the region of 11,000 Brits now own a property on Mallorca.

Full story from www.homesworldwide.co.uk

In a bid to boost its flagging resale market, agents in Spain have been advising vendors to sell their property in Sterling to attract British buyers put off by the poor performance of the Pound against the Euro.

Last week the Pound fell against the Euro to its lowest level since the single currency’s inception in 1995. It has strengthened since and currently, £1 will only buy around €1.25 compared to roughly €1.50 just 12 months ago. To put this in context, a property for sale in Spain worth €200,000 will now cost a British buyer £160,000 compared to around £133,600 this time last year.

Although British buyers will face this problem anywhere that has the Euro, agents in Spain are particularly worried as the British buyer, once their biggest foreign investor, are not as active as before and some agents see this as another marketing tool to help draw them back in.

“It is something we are looking at,” said Peter Whitehead, sales executive at Hacienda del Alamo Golf Resort. “However, most of the purchasers in this country have a Euro mortgage so it becomes less of a problem. For those that don’t, or need a quick sale and a UK buyer is ready, then it is something to examine. It is another selling tool and it would definitely be a good sales vehicle.”

One market where this is happening in greater numbers in Menorca which has one of the highest ratios of British owners across Spain. At present, 95% of transactions on the island are for resale property and 75% of the vendors are English.

“Categorically we have noticed a big increase and our last five sales in the last fortnight have all agreed to sell in Pounds Sterling,” said Colin Guanaria, founding partner of Menorcan-based agency Bonnin Sanso. “It is a brilliant selling tool for agents as a lot of British buyers are unsure of the exchange rate at the moment or would just prefer to deal in Pounds.”

Although it has been legal in Spain for many years to fix a contract in certain currencies before the sale, many agents are unaware of this option to give to sellers.

Full Story from OPP (registration required)

Last week, one of the larger national property portals in Spain, Idealista.com, quoted an article which appeared in the Spanish newspaper ABC.

Entitled "Developers say that house prices will not fall further", the article explains how The G14, the association formed by the 14 largest Spanish developers, believes that property prices in Spain have now stabilised.

They think that from now on we can hope for a revival in new home prices, as long as the finance is there. If it is not, they warn that this could provoke the loss of 700,000 jobs and a drop of 1.5 points in the economic growth of the country.

I've never been a fan of the G14's style of PR and it would appear that the Spanish public sees things the same way. To date, almost 700 people have commented on these 'findings' by the G14.

Here's a couple of my favourite comments: "Developers can say many things .. the credibility of this group is zero." "G14 or G13? What will G12 say next week?"

The problem is that the G14 offer no proof or evidence that prices have actually bottomed out. They quote their own statistics and routinely conclude that the time to buy property is now.

Unfortunately for them, this kind of self-promotion is no longer effective (if it ever was). In a world where mass communication is easier, faster and cheaper than ever before, hundreds or thousands of people can pass judgement on such marketing insults.

Compare this to this article demonstrating the attitude of the Mayor of Marbella. Notice, how she acknowledges the problems and the difficulties associated with solving them? I'm not holding this up as a great example of PR but, compared to the bullying and threats of the G14, at least the Mayor of Marbella falls short of insulting our intelligence.

Despite the G14 spin, there's a correction in house-prices occurring at the moment - in Spain, in the UK, in Europe and in the US. As we said last week, for some this spells opportunity but one thing's certain, it's not over yet.

Martin Dell, Kyero.com

Any idea that the exodus from Britain of those settling abroad might be waning appears wildly premature. The latest survey predicts 1.8 million Britons retiring abroad by 2025 and 3.3 million by 2050. The survey, on behalf of NatWest International, provides further evidence that the majority of those making the lifestyle change do not look back.

Nine in 10 expats said they enjoyed better quality of life and six in 10 said they did not intend to return to the UK.

Canada was rated the best country to emigrate to, followed by New Zealand and Portugal.

However, beneath the glitz lurked a less happy picture. Three quarters of those surveyed admitted to feeling homesick some or all the time, missing friends, the British culture and sense of humour.

What the survey might usefully have expanded on are health concerns, especially among older expatriates.

Many of those retiring to the sun are doing so at a time when body and brain begin to disintegrate at increasing speed. Local provision of healthcare may be either inadequate or inaccessible to the expatriate.

The language barrier can loom large. Hospital practices may disturb - the National Health Service in Britain has its critics but patients do not generally rely on relatives bringing in lunch, which is routine in some Mediterranean states.

Most expatriates can benefit from medical insurance. For others it is a must. Unless expats are guaranteed full access to healthcare in their adopted state, and standards there are acceptable, skipping cover is flirting with disaster.

Distress and financial hardship can strike when expats are denied care expected as a right. Since NHS access rules were tightened in 2004, the individual who seeks to return to the UK for "free" treatment may also be in for a disappointment.

Just like its continental neighbours, Britain has clamped down on "health tourists". France, the Netherlands, Spain and several Swiss cantons have taken similar steps.

However, these countries offer generally excellent medical services, with hospital-acquired infections much less common than on NHS wards. The gap is recognised by insurers.

David Pryor, senior executive director at MediCare International points to "consistently better" healthcare across much of Western Europe compared to Britain. He said: "The French are rightly proud of their healthcare system and it is still true that access to specialists is quicker, waiting times for operations are lower and certainly hospitals and clinics are cleaner."

Insurers have responded by offering schemes aimed at people who spend most of their lives in continental Europe but a proportion in their home state - in many cases the UK. Limiting the scope helps limit the premium.

As the name implies, Exeter Friendly Society's Spain Residents Plan is mainly restricted to treatment within the country, but limited benefits apply in UK. A 40-year-old would pay €60.67 a month and a 45-year-old would pay €70.76 a month.

Another plan aimed at Spain's burgeoning expat community is Bupa International's Health Plan Complete. It gives comprehensive acute cover in Spain and another, designated, European country.

Obviously, policyholders tend to select their home country as their designated state. But this is not essential. Unusually, the plan differentiates between genders. A man aged 40-45 would pay €76.90 a month and a woman 40-45 would pay €103.70 a month.

Beyond Europe, in the Middle East and the "White" Commonwealth expatriates are being asked to prove they will not burden overstretched national health services.

People who emigrate to Australasia and North America are unlikely to get a visa if they are seen as likely to take more from the economy than they put into it. Mandatory health cover is one solution. In Australia, medical insurance premiums attract substantial tax breaks.

Most top spots for emigration in the Natwest survey offer quality of care that makes medical repatriation benefit unnecessary. However, once you move beyond the developed world, repatriation and/or air carriage assumes vital importance.

Assistance companies, contracted to insurers, specialise in emergency medicine. Their job is to get the patient to a suitable hospital with minimal delay.

Their responsibilities may go further than the purely medical. For instance, during the recent inter-tribal strife in Kenya, an American policyholder whose wife's ethnicity put her at risk, faced the threat of extreme violence.

The insurer's assistance company organised an armed police team to escort the couple to the local airport and then on to a safe haven in Nairobi.

Full story from www.telegraph.co.uk

Over 500 people attended the inaugural Leading Property Agents of Spain (LPA) conference on the Costa del Sol last week, which examined the issues surrounding the region’s property market and how best to address these to ensure its sustainability leading up to 2020.

The Mayor of Marbella, Angeles Muñoz, opened the conference in front of a packed function room at the Don Carlos Hotel in Marbella filled with numerous television, print and radio media, local residents and property professionals.

Muñoz acknowledged the problems plaguing the region in the past from corruption at government level through to oversupply and the ill conceived planning of certain developments, however she said that her administration would work to correct these problems by taking a more consultative approach with residents and industry in the future.

“I am very optimistic about the economic future of the Costa del Sol, it is just a question of getting our assets in order,” she told the audience. “We will be providing support and welcoming with open arms the suggestions that the industry have for the region. A lot of people are concerned with the public services and we want to ensure that future developments are fluid with the transport infrastructure and that every new project improves the day to day life on the Costa del Sol.

“A lot of work needs to be done for this to happen and we need to be untied on this front.Marbella is a magnificent city that, despite everything, has maintained its brand. The city needs consolidation and I would like to ask you to defend Marbella as the town council works to improve the region. I am convinced that we have been through this difficult period and will recover.”

Felipe Martinez de Marmol, from solicitors Martinez-Echevarria Perez & Ferrero Abogados, explained in further detail the regulations surrounding Decree 218, passed in 2005, which requires all agencies selling property on the Costa del Sol to have a Documento Informativo Abreviado (DIA) and a Ficha Informativa (FI) - similar to the UK’s Home Information Packs (HIPS). De Marmol believes the need to be compliant with the Decree is becoming increasingly important as officials from local government have been conducting snap inspections of offices on the Costa del Sol recently. He added that buyers needed to be taught to ask for these documents, as well as agents providing them.

Javier Ledesma, President of AEGI, the Spanish estate agents association, who spoke about the future of the area’s property market leading up to 2020, acknowledged the concerns shared by several members of the audience surrounding Decree 218, however said it was a case of recognising it was there to stay and making sure individual firms were compliant.

“After two years we still haven’t taken Decree 218 seriously. While we might not agree with certain aspects of it, we must follow it. It is the law. Some 67% of real estate offices still don’t provide the mandatory information required by the executive order published in 2005 and we are in April 2008. People didn’t believe it before and thought it was a gimmick but it is not and we are in a delicate situation.”

Other speakers examined issues surrounding the Costa del Sol's property market, such as concerns over its environmental sustainability, the best way to promote residential tourism and more detail about the Marbella PGOU plan.

The LPA has another conference that will examine these and other issues, in more detail, later this year.

Article from Overseas Property Professional

We all know how important location is when buying a home, but it’s also a vital issue to consider when going about your tax planning. This doesn’t mean you need to choose your country of residence based on its tax rules, so if you’d like to move to Spain the Spanish tax system should rarely be a deciding factor. However various location issues do come into play if you want to get your planning right and pay as little tax as possible, wherever you are resident.

You should always review your tax planning when you move to a new country because it should be specifically designed to be effective in the country you are tax resident in.

First of all you should make yourself familiar with the tax rules and rates of your country of residence and do everything necessary to be tax compliant in that country. Many British expatriates move to Spain but continue to pay tax in the UK rather than here in Spain. You cannot choose where to pay tax based on personal preferences or which country has the lowest rates. If you meet the Spanish residency regulations then you must pay tax here on your worldwide income, gains and wealth.

Pension income can be the exception – UK government services pensions remain taxable in the UK – so you will need to seek specific advice for your type of pension fund.

You then need to apply the local regulations for the taxation of savings, investments and wealth to establish which structures are most tax efficient in your country of residence.

For example, many British people had set up ISAs and PEPs when they were in the UK to benefit from their tax saving opportunities. However these benefits only apply to British residents and you will need to pay tax in Spain on the income and gains arising within such funds.

So once you are resident in Spain you need to use arrangements that are tax efficient in Spain. The obvious one is the offshore insurance bond which is taxed very beneficially and can significantly lower the tax bill on your savings and investments. You will probably need to sell your ISAs and PEPs to release the capital and then place it within the tax “wrapper” of the offshore investment bond.

With regards to Spanish succession tax, your specific location in Spain can make a difference. Each region applies its own rules and some regions have more favourable rates and allowances than others. However you need to be habitually resident in that region for the local rules to apply.

Whether you are tax resident in Spain, the UK or any other European country, you are likely to be liable to tax on your worldwide income and assets.

It’s important to note that such income is taxed even if you do not bring it into the country you are resident in. So if you live in Spain and have money earning interest in an offshore bank account, this income is liable for tax in Spain and should be declared in Spain, even if the interest is rolled up in the account and not used in Spain.

Likewise, if you are resident in the UK and earn rental income from a Spanish property, you need to declare this income in the UK even if you deposit the income in a Spanish bank account, spend it in Spain and even pay tax on it in Spain.

The option to have tax withheld on bank interest, which is offered by banks in the Isle of Man and the Channel Islands, among other jurisdictions, instead of automatically exchanging information with your local tax authority, can be misleading. It implies that since tax has already been deducted at source you don’t need to declare the interest in Spain. In fact, all income must be declared in Spain if you are resident there, even if you have already paid tax on it.

When selecting an investment structure, such as an offshore insurance bond, the location of the bond is important. In Spain, only ‘approved’ bonds receive beneficial tax treatments and to be approved the bond needs to be issued in an EU country. Jersey, Guernsey and the Isle of Man are not EU jurisdictions and so do not receive the same tax advantages.

Some jurisdictions offer other benefits as well, for example, for non-residents of Luxembourg, investments into Luxembourg based investments are exempt from capital gains tax and income is accumulated free of all taxes, except for dividends arising from underlying investments which may be subject to a small withholding tax in those countries which make this deduction.

You may also like to consider the likely location of your beneficiaries when they come to inherit your assets, to arrange in advance for their inheritance to be as tax efficient as possible.

Interestingly, when it comes to UK inheritance tax (IHT), neither your location at the time of death, nor your beneficiaries’ tax residence, necessarily matter. IHT is based on domicile rather than residence so it’s possible for IHT to be due even if both you and your beneficiaries are living outside the UK.

If you remain a UK domicile – and many expatriates living in Spain do – your worldwide estate will be liable for IHT in spite of the fact that you are tax resident in Spain.

However, if you intend to live in Spain permanently and you take specific steps to change your domicile status, you could then set up your financial planning so that you escape the IHT net for generations to come.

When it comes to Spanish succession tax, if your beneficiaries are resident in Spain they will be liable for this tax on all assets they inherit, wherever located. If they are not resident here, but the assets being passed to them are located in Spain, they will also be liable for succession tax in Spain.

Tax planning can be very complex for the expatriate. It is advisable to seek professional advice to make sure you have followed the rules correctly and are paying as little tax as possible for your circumstances.

Full story from www.blevinsfranksinternational.com

Spanish builders are tempting home buyers with free cars, mortgage holidays and hard cash as they try to lift the gloom shrouding the housing sector. Some companies are also diving into the rental market.

At the annual property fair in Madrid last week, the number of promoters was down by a third from the previous year, many of them victims of the deepening housing crisis. With fewer buyers milling around models of white-washed housing estates, there were fewer lines to see sales representatives.

"Since the end of the summer, movement in the market has been very, very slack," said Javier Roca de Togores, managing director of Zapata, a promoter selling homes on the southern fringes of Madrid. "We have seen huge falls of around 70 or 80 percent."

With prices of existing Spanish houses down by more than 4 percent since peaking in mid-2007 and the market still overvalued by up to 20 percent, according to the International Monetary Fund, some companies are shifting to rental properties.

Brokers say U.S. and northern European funds are snapping up coastal plots for 20 percent to 25 percent less than the asking price and new apartment prices, even in Madrid, are down 15 percent to 20 percent on average - a trend yet to show up in official price data.

As the rental market accelerates, these buyers may benefit.

Spain has built more than five million new houses in the past decade, taking the stock of existing homes to 24 million, because of economic growth averaging 3.8 percent, historically low interest rates and an influx of immigrants to cities and foreigners to the coastal regions.

Full story from International Herald Tribune

With the fog of gloom surrounding the Spanish property market, I was quite surprised to find the mood at SIMA distinctly upbeat and vibrant. Although exhibitor numbers were down 20% on last year, the developers who did exhibit did so in force and style.

A handful of large empty spaces at SIMA left by 'no-show developers' spoke silently of how some have clearly fallen foul of their creditors. It seems, however, that this will not be the fate of all.

Many developers we spoke with, while admitting the severity of the current market, said they had the foresight to diversify their businesses and take a more conservative approach to their borrowing.

Even so, there was some deep, deep discounting evident on some of the developer stands. Others are reluctant to publicise the extent of their discounting but, I strongly suspect that if you came to Spain ready and able to purchase, you'd be pleasantly surprised by your negotiating power.

With new properties coming on the market every day, the unfortunate choice facing some buyers is to default on completing the purchase and lose their deposit. In some cases, this can be as much as 40% of the property value.

In these cases, many developers are passing these savings directly to a new buyer - effectively offering the property for sale at 60% of the original price. Even with the pound at an all-time-low against the Euro, this is a huge discount.

With the Pound currently worth around 1.25 Euros, Spanish property now appears to be 15% more expensive to UK buyers than just a few months ago. Currency specialists, Moneycorp, say that the hope of 1.4 Euros per Pound is a distant dream. Right now, the rate improving to 1.3 would seem like a significant revival for Sterling.

Incredibly, this particular cloud does have a silver lining. Imagine a British family selling their holiday home in Spain with the intention of reinvesting the proceeds in the UK. Let's say that they're hoping to realise 100,000 GBP from the sale of their Spanish property.

A few months ago, with the exchange rate at 1.45, they would be looking to sell at 145,000 Euros (ignoring taxes and selling expenses). Now, they can afford to sell at 125,000 Euros and still achieve their goal of netting 100,000 GBP.

On top of that, if you can find a motivated seller, on a fixed timeline who wants Sterling, you have the makings of a very good deal.

Developer discounts, distressed sales, motivated sellers and currency fluctuations all spell one thing to me - opportunity - but not the same kind as in the boom years. This time, the opportunity requires research and patience.

Seasoned property consultant, John Wolfendale of Property Investment Management Spain says "Now, for the first time in ten years, we are entering a buyers market. Astute investors will be able to make money and also enjoy themselves hugely in the process. .. In my view we will look back in 5 years time and say that 2008 was when the smart money went into Spain."

Yes, you'll need your wits about you. Yes you'll need to exercise caution. No, the stories you read in the UK press about Spain don't tell the whole story. The buzz at SIMA spoke of opportunity and a property market able to reward the patient, savvy buyer.

Martin Dell, Kyero.com

Thousands of Britons who have sold property in Spain in the past few years could be due a tax rebate worth £10,000 or more.

Spanish property experts claim that many people paid too much capital gains tax when they sold their property, because Spanish tax law unfairly penalised foreign property owners. As a result lawyers are now pursuing legal action in order to force the Spanish government to pay compensation to those affected.

The controversy surrounds the capital gains tax that is paid when a Spanish property is sold. Until recently British property owners (and other foreign nationals) had to pay 35 per cent of any gains as tax. This compared with just a 15 per cent tax charge that was paid by Spanish nationals.

It is estimated that these additional tax payments netted £37m for the Spanish government. But the European Commission challenged these rules, which it claimed were discriminatory and contravened EU rules.

As a result the Spanish government changed its tax rules at the start of 2007, and the 15 per cent tax rate is now levied on both Spanish and overseas property owners. But to date there has been no move to offer rebates to those who had previously paid the higher rate – hence the legal bid to force the government to refund these "discriminatory" tax charges.

How many Brits are affected?

The exact figures are unknown, but conservative estimates suggest at least 4,500 properties have been sold by UK owners in the past four years. Privately some property experts put the figure much higher, and suggest almost 70,000 could have been hit with this unfair tax charge.

Emilio Alvarez, a lawyer with the firm that is leading this legal action says: "This tax trap is thought to have affected hundreds of thousands of people across Europe, including many in the UK."

What is known is that over the past decade house prices in Spain have surged ahead, so Brits selling second homes and holiday villas and apartments will have been sitting on comfortable gains.

Between 2002 and 2006 house prices have risen by an average of 15.7 per cent a year, although, as in the UK, property prices have started to dip in Spain again.

At the end of the 2006 – just before the new tax rules were harmonised – the average Spanish property cost €171,000 (£137,000). However, as most Brits buy in popular holiday spots, the average price of a holiday home stands at slightly more than the national average.

HiFX the currency exchange broker estimates that between 2002 and 2006 the average UK family selling property in Spain paid a tax bill of £14,523, compared to a tax bill of just £6,224 paid by Spanish residents. In other words they have overpaid their CGT by a whopping £8,299. Given that these taxpayers are entitled to claim interest on such overpayments, HiFX estimates that the average holiday home owner is looking to reclaim a rebate of £10,788.

Mark Bodega, a director of HiFX, says: "These are conservative estimates. Far more homeowners may be affected and some of them will be due far larger rebates."

So how does anyone affected put in a claim?

Unfortunately at present it isn't simply a case of filling in a form and getting the money through the post. Those who want to try and get this rebate will have to pursue legal action – which can be costly and of course difficult, particularly in an overseas jurisdiction. However, there is a class action underway – and Spanish lawyers are appealing for Brits who have been hit by this charge to come forward and register a claim. This legal action is being pursued on a " no win, no fee" basis.

On the up side this means there are no hefty legal fees to pay, bar a nominal £100 fee to register the case. However, if the case is successful, then property owners will have to hand 35 per cent of any award over to the lawyers. So if British property owners did win the case and were awarded an £11,000 rebate the legal fees would reduce this payout to £7,150.

Legal action on this scale can also be a slow process. The law firm heading the action, Costa, Alvarez, Manglano & Associates, estimates that it could take at least two years to resolve, although preliminary hearings have already been going on for one year.

But those who are interested in joining this action should not hang about. Under Spanish law, claimants must register a claim within four years of the property being sold – and the tax paid. This means that anyone who sold a property prior to 2004 will be unable to get their tax back.

Alvarez says they are already pursuing a number of cases through the courts, and he is optimistic they will get a positive result. He says the fact that the Spanish authorities have already changed its rules after EU intervention indicates the tax charge was unfair.

"Those who sold at the start of 2004 have already missed out. But thousands of Brits can still join forces and fight to get the Spanish tax authorities to pay back the money that is owed to them."

He adds: "Many British property owners may be unaware of these changes to Spanish tax law, and unaware that they could be eligible for a tax rebate. We are trying to raise awareness of this issue in the UK, and obviously hope more people will join this class action."

He says he believes this could be one of the biggest legal cases of its kind to be brought against the Spanish authorities.

Full story from www.telegraph.co.uk

Now, 1 euro is worth 80p, an all-time high against the pound. Bad news for British holidaymakers – but are there more serious consequences of living next door to the world's strongest currency?

Tens of millions of British people will experience their own credit crunch on holiday this year as the soaring value of the euro forces them to pay more for everything from the price of a coffee in a Parisian cafe to a hotel room in Barcelona. As currency traders pushed the European single currency to a record high against the pound yesterday, holidaymakers were coming to terms with the fact they now have almost a fifth less spending power on the Continent than a year ago.

The 17 per cent fall since last February has come about as the euro has powered ahead on the strength of its member economies, while the pound has slumped, most recently because of the knock-on effects of the sub-prime collapse in the US.

The euro's new high of 80p, reached in early trading yesterday, came after the International Monetary Fund warned that UK growth would only hit 1.6 per cent this year, compared with the Government's claim of up to 2.25 per cent.

The euro's surge may spur new theories from economists that the currency of the eurozone will become the main international unit of currency as early as 2015, upsetting almost the best part of a century of dominance of the dollar.

For holidaymakers, however, the collapse of the pound has an earthier reality that will curtail their spending power in shops and restaurants in Ireland and on the Continent. In practice, it means spending money of £500 earmarked for eating out, trips and presents is now worth only £415 in the 15 eurozone states.

The 42 million foreign holidays a year that British people take are influenced by affordability and, during the past two years, the cheap dollar has lured thousands of Britons to stock up on designer jeans and iPods in New York.

However, the majority of foreign holidays, some 31 million, are taken in the eurozone and going there – and staying there – has become markedly more expensive.

As a result of the currency fluctuation, a family weekend break to Disneyland in Paris that would have cost £456 last year costs £533 this month. A day's car rental in Vienna that would have set back a Briton £56 now costs £67.

And those expecting to savour a meal for two Ferran Adria's acclaimed El Bulli restaurant in Spain will find the experience has risen in price from £195 to £236.

Many people who had been hoping to go on holiday to France or Spain may be forced to change plans and stay at home instead.

Others may look for cheaper destinations outside the eurozone, such as Bulgaria or Croatia.

The Association of British Travel Agents said yesterday that the rise of the euro might prompt the growth in journeys to Turkey and Egypt as well as long-haul trips.

At home, the surging euro will apply upwards pressure on much that we import from the Continent, from cheese to cars, though retailers may take some of the pain.

But there will be a sign of relief from British companies battling to export their goods as their products become cheaper in the 15 euro countries.

After a shaky start in 1999, when the economies of the 11 participating states were lurching downward, the euro has become a totemic success for the European project and has been rising against the pound for more than a year.

Further pressure is likely to be piled on to the pound – and in favour of the euro – today if, as expected, the Bank of England's Monetary Policy Committee cuts interest rates. Some economists believe the rate may cut by as much as half a per cent.

Geoff Kendrick, a currency strategist, said: "The UK has clearly softened a lot more than Europe and I guess that's why we'll see the Bank of England cut rates tomorrow while the ECB will be hawkish... At least for now it looks like the trend (in euro/sterling) is well and truly intact."

The pound has weakened after days of bad economic news which has increased the chances of the interest rate being cut, reducing the attractiveness of holding the currency.

This week, the Halifax house price index posted its steepest monthly fall in over 15 years, a 2.5 per cent fall in a single month. Banks have withdrawn their 100 per cent mortgage deals and Nationwide's consumer confidence fell to its lowest level in four years.

Full story from www.independent.co.uk

Windmills pay. On a breezy Saturday at the end of March, Aeolian Parks scattered across the hill-top ridges and off-shore sandbanks of Spain produced 40.8pc of the country's electricity needs - 9,862 megawatts to be precise.

The much-derided turbines produced enough wattage to power the great cities of Madrid, Barcelona, Seville, Valencia, Toledo, Cordoba, Granada, Santander, Bilbao, and Zaragoza combined. The workday record on a Tuesday, March 5, was 28pc.

Years of nurture by the Spanish government have paid off. Spain is a global superpower in the wind race, with 15,000 MW of capacity. The region of Navarra is 70pc green, shielded against gas-shocks, Russian politics and soaring oil prices.

Today's wind turbines are a far cry from the archaic mini-mills that scar the landscape for little return, and provoke such fury in the English shires. They are vast. Each mast can power a neighbourhood.

Here in the wet misty mountains of Asturias, the German power group E.On is erecting a battery of mills that tower 410ft into the sky. They are higher than the dome of St Paul's Cathedral or the US Congress on Capitol Hill. The rotors alone dwarf the wingspan of an Airbus A380 super jumbo.

"We are beyond the boutique phase," said Frank Mastiaux, the head of E.On's green operations. "When this began in the 1970s it was a niche play, a nice tax break for German dentists and doctors. Now it is turning into an industrial business. Productivity has grown by 150 times in 25 years."

Every mill costs €2.6m (£2m) to buy and erect, yet the Danish manufacturer Vestas is sold out until 2010.

Full story from www.telegraph.co.uk

The Spanish prime minister, José Luis Rodríguez Zapatero, yesterday outlined how his re-elected Socialist government will save Spain from economic crisis.

In a speech to the Spanish parliament as he begins his second term, Zapatero announced an ambitious public works programme, which will pour millions of euros into building 150,000 affordable homes a year in an effort to create jobs in a construction sector that is heading for a recession after a decade-long boom.

Despite criticism that this is just a "short-fix" solution to deeper economic ills, the government will also invest in major road- and rail-building programmes.

In an effort to help the poorest, the government will pay back £316 of income tax to keep consumer spending stable. Those struggling to pay mortgages will get more time to make repayments under plans to be agreed with the finance industry.

But days before his speech, Zapatero received more gloomy economic news. José Luis Malo de Molina, the head of Bank of Spain's research unit, said yesterday the economy had slowed down more this year than predicted, as the effects of the faltering construction industry spread.

The central bank last week cut its forecast for Spain's growth this year from 3.1% to 2.4%. Last year, growth stood at 3.8%.

Zapatero will also announce an all-party alliance against Eta. Despite the failure of peace talks with the Basque separatist group in 2006, he has promised to try to reach a solution to the 40-year-old conflict. But he has vowed never to return to the negotiating table unless Eta abandons its arms.

Full story from www.guardian.co.uk

International banks are scrambling to sell their holdings of Spanish mortgage debt at a steep discount, fearing that the country may be sliding into the worst economic downturn in its modern history.

A blizzard of grim data has soured the mood, capped yesterday by a plunge in PMI purchasing managers' index to an all-time low of 40.9. Car sales fell 28pc in March, and even Madrid's legendary tapas bars seem to have lost their late-night sparkle.

Inmobiliaria Colonial - once the country's biggest property group --is in emergency talks with banks after Dubai's Investment Corporation pulled out of a rescue deal.

Developer Martinsa Fadesa is struggling to restructure €5bn of debt to stave off insolvency.

Traders says the market price for Spanish mortgage securities has begun to slide abruptly, replicating the pattern seen in the US last year. Large French and German funds and insurers appear to be liqudiating assets in a pre-emptive move, afraid being caught yet again in a violent downturn.

Ismael Clemente, head of Deutsche Bank's property arm RREEF in Spain, told a panel of experts in Madrid that foreign banks were now dumping Spanish mortgaged debt at a 40pc discount.

Mikel Echavarren, director of the property consultancy Irea, said Spain's housing market was far weaker than the official statitics suggest, warning that prices could fall 20pc to 25pc.

"All kinds of ploys have been used to disguise the true extent of the price falls, which we think are 5pc to 7pc already. Buyers have totally abandoned the market. We've had a wave of negative sales as people pull out of commitments already made," he said.

"We have a very worrying situation. The developers simply cannot refinance their debts. We need to cut interest rates by 2pc, which is obviously not going to happen," he said, adding that the crash could be sharper than the property crisis in the early 1990s.

Santiago Baena, head of Spain's estate agents lobby API, said the downturn had already forced 40,000 agents to close their doors, laying off 120,000 staff.

The Bank of Spain said default rates would rise but insisted that the Spanish banking system remains in good health, without much exposure to the US subprime debacle. The loan-to-value ratio on mortgages was kept to 70pc - although a report in Germany's Die Welt newspaper today alleges that false pricing was often used to circumvent the rule.

The authorities said that a crisis comparable to the early 1990s (when bad debts reached 13.1pc) would erode the capital base of the banking system by 63pc, a manageable level. The developers owe €290bn to the banks and lenders, known as'cajas".

The government is preparing a €20bn spending blitz on high speed railways and other mega-projects to cushion the downturn. Spain's trump card is a budget surplus of 2pc of GDP last year, leaving in ample scope for fiscal stimulus - in sharp contrast to Italy, France, and Britain.

The root cause of the crisis is in a sense Europe's monetary union. The euro effect halved Spain's interest rates almost overnight. Rates then fell below Spain's inflation rate for several years, fuelling an explosive credit boom. The country's current account deficit has reached 10pc of GDP, the highest of any major economy.

The process has now kicked into reverse. Mortgage rates - priced off three-month Euribor - have nearly doubled since late 2005.

David Owen, Europe economists at Drsedner Kleinwort, said Spain was waking up to the reality that there will be no quick-fix. "They are no longer arguing about whether there will be a recessoin, but about how deep it will be," he said.

"Spain is no longer able to set monteary policy for its own needs. It could face zero-growth for five years," he said.

ABC newspaper reported that the Bank of Spain rushed its Financial Stability Report into print two months early in order to refute "tendentious" claims in the British media that Spain's banks had become reliant on emergency funding from the ECB after the capital markets seized up.

The banks have been issuing mortgage bonds on a large scale to use a collateral at the ECB's lending indow, raising concerns that they are becoming dependent on taxpayer funding. The Bank of Spain said they had borrowed €44bn from the ECB, insisting that this was "fully consistent" with EU rules.

The ECB said its latest €25bn auction of six-month funding this week was heavily over-subscribed, with €103bn of bids from 177 banks at rates as high as 4.88 pc. It did not reveal how much of the bidding came from Spain.

Deutsche Bank expects house prices to fall 8pc this year as the market struggles to clear a glut of unsold homes. Construction peaked in 2006 when last year when 740,000 new housing units were built - more than in Germany and Britain combined.

Standard & Poor's said Spain risked a "major collapse" in construction after a 40pc fall in housing permits. Building has accounted on a fifth of all jobs created in Spain since 2000. It said the country faced a "major and likely painful adjstment".

Full story from www.telegraph.co.uk

Members of the European Parliament have held a two-day meeting in Brussels to address the growing number of complaints from British, German, Dutch and other European citizen’s whose properties have been demolished in Spain – particularly across the Valencian region.

At the close of the meeting, MEPs from both sides of the political divide in Britain have been making their voices heard and called on the Spanish government to put an end to the demolition of private British-owned property in the country.

“They [property buyers] were assured that deeds to their property were legal as advised by local lawyers, developers and officials,” said British Labour MEP Michael Cashman at a press conference. “Now because of a combination of corruption and interpretation of new property laws, these people are facing ruin. Homes will either be demolished or people are now being asked to pay even more money for water and electricity supplies, which they were assured their property, would receive.”

Mr Cashman added that the problem is acute in Valencia, but it is also happening in Andalucía, parts of Murcia and on the Canary Islands.

Tory MEPs also waded into the discussion and called for an immediate cessation on all demolitions and future land grab developments until a solution can be finalised.

“The Spanish authorities have had long enough to talk about change,” said Sir Robert Atkins MEP, Conservative coordinator of the European Parliament’s Committee investigating land grab. “Now is the time for action. I am calling on the Spanish authorities to issue an immediate moratorium on demolitions and future land grab developments. The damage can already be seen both to those owning property in Spain and to the local environment. If the Spanish authorities fail to finally take action, I will be referring this case to the European Court of Justice and the European Court of Human Rights.”

The European Parliament has previously issued four resolutions calling for action to be taken to protect property owners, and although the law was amended in the form of the new Valencia Land Law (LUV), many still face the expropriation of their land without compensation or arbitrary costs for what the Conservatives are calling “unnecessary infrastructure developments” in their region.

Another Conservative, Neil Parish MEP, accused Spanish councillors of colluding with property developers to undermine the “fundamental principles of property and human rights” and brought to attention the case of Jackie Cotterill, a Spanish town councillor, who was allegedly threatened with legal action by authorities after speaking out for property owners and local environmentalists.

“This abuse of property law is in contravention to the Charter of Fundamental Rights which Spain signed up to in the form of the Lisbon Treaty,” explained Parish. “The gag on Cotterill is also a blatant breach of democracy and completely goes against the European values Spain promotes.”

At the start of the year, the editorial director of Homes Overseas Magazine, Rupert Bates, appeared on Channel 4’s Richard and Judy programme to call for the Labour government to step in and help the thousands of British homeowners potentially at risk of having their properties demolished in Spain.

Flanked by two British buyers whose properties were threatened, Bates told the programme’s two million viewers he believes Foreign Secretary David Miliband should be travelling to Spain immediately to defend the rights of UK buyers.

“Spain is not some banana republic, but the UK’s number one tourist destination,” he said. “Many UK buyers have bought recently in Eastern Europe and other less mature and less transparent overseas property markets, where illegal building is also rife and property law at best untested. Could the same thing happen in a few years time on other coastlines where Britons have bought holiday homes?

“Can you imagine the outcry if armed police and bulldozers moved into a London street and demolished properties owned by foreign buyers?” he added. “The Labour government probably assumes the UK owners in Spain affected are wealthy Conservatives with the cheek to invest their money outside Britain, so let them eat paella.”

Story from OPP.org (subscription required)

The cost of holidays in Europe is set to soar this year as the growing strength of the euro adds to tourists' shopping, bar and accommodation bills. Six months ago it would have cost £67 to buy €100; now it costs £78 after a 16 per cent fall in the value of the pound against the euro. Financial experts predict that the trend is likely to continue.

'This is having quite an impact over here,' said Kevin Mountford, a financial expert at Moneysupermarket.com. 'From a tourist perspective, you now have to be careful not to leave your currency exchange until the last minute.' A meal for two in a typical French restaurant with drinks and coffee at the end of last year would have cost £52 on average, according to price research from the Post Office. The same meal just a few months later would now cost £60.

Even if sterling does recover over the summer, tour operators agree their prices with hotel and apartment owners well in advance so the current exchange rate will be felt by those heading for some winter sun. The Post Office found that the rising strength of the euro is likely to be felt most by holidaymakers used to enjoying the relatively low costs of Malta and Cyprus, which both switched to the euro in January. Before the 2002 switch to the euro, Spain and Greece were the cheapest of Europe's major holiday destinations. To add to holidaymakers' financial burden, the cost of spending on credit and debit cards overseas is also rising, according to website uswitch.com. A number of card companies have recently started charging customers a flat fee every time they use their debit card abroad, on top of the foreign exchange fees they already pay.

People looking to buy property overseas will also be affected by the sharp drop in the value of sterling. A €150,000 house in Spain a year ago would have cost a UK buyer £105,000; now it would cost £120,000. 'On the positive side, the cost of property has fallen in many European countries, but the problem is that any gains are now being offset by this poor exchange rate,' said Mountford. 'On the flip side of the coin, friends going to the US for their holidays are now enjoying better value for their money than ever.'

British holidaymakers in the US have been able to take advantage of a strong exchange rate over the past few months, with one pound buying almost two dollars. A recent survey by Halifax Insurance predicted an increase in long-haul mini-breaks, which it dubs 'breakneck breaks'.

Eastern Europe's emerging city-break destinations, such as Krakow, Tallinn, Riga and Dubrovnik - which are in countries not yet using the euro - could also be set to benefit, predicts the Post Office. Bulgaria offers the cheapest European holiday, according to travel agent Thomas Cook. Amid the financial crisis, UK operators are hoping for a boost for British holidays, with foreign tourists taking advantage of the favourable exchange rate.

Full story from www.guardian.co.uk

Following the re-election of the Spanish Socialist Party, Partido Socialista Obrero Espanol (PSOE), led by Jose Luis Rodriguez Zapatero, on March 9th, investers planning to buy property in Spain can look forward to a simpler, more buyer-friendly process.

As part of the pre-election promises, the PSOE vowed to mke life easier for buy-to-let investors by allocating funding to better regulate the Spanish property market.

Zapatero intends to encourage the purchase of properties for rental through mortgages, while improving security and guarantees for landlords and simultaneously boosting protection for tenants.

The Association of International Property Professionals (AIPP) 2007 market report recently revealed that Spain was still the favourite destination among Brits looking to buy a second home in 2007. In order to sustain this popularity, Zapatero has promised to regulate the property market, a move that will include a shake up of both estate agents and property administrators.

Equally as important, the PSOE has promised to eliminate wealth tax. In addition, an increase in the tax-free allowance for Inheritance Tax of up to €60,000 will mean that approximately 80 per cent of beneficiaries will now pay nothing plus an exemption for main homes.

Commenting on the manifesto, Peter Esders, partner at The International Law Partnership says, “Although there has been no change in leadership, the proposals should prove very encouraging to potential investors and current owners of property. Regulation of the property market is long overdue and proceedings to action this will make trading in this market safer and thus improve confidence in the Spanish property market on a worldwide level.”

Esders continues, “Spain has long been a favourite among British people buying a second home, indeed, the favourable lifestyle together with the great food, beautiful scenery and stable political climate will always make this destination a winner. The positive aspects of the manifesto, as detailed above should strengthen the decision to buy amongst those who are still in consideration.”

Full story from www.homesworldwide.co.uk

He was credited with — and blamed for — the invention of the package holiday, bringing millions of milk-skinned Britons to the Spanish costas and transforming Benidorm from a sleepy fishing village into the forest of concrete towers it is today.

Pedro Zaragoza Orts, the Mayor of Benidorm for 17 years in the 1950s and 1960s, died yesterday from heart failure at the age of 85, leaving Spaniards to ponder the remarkable transformation he helped unleash on their country. In the four decades he held office in the Costa Blanca town, Spain has moved from being an impoverished and deeply conservative country to one of the wealthiest and most and liberal nations in the world.

Hundreds of mourners attended the former mayor’s wake yesterday, hailing him as the “father of modern Benidorm” and a visionary who made Spain the tourism superpower it is today. More than 53 million tourists visit Spain a year, 16 million of whom are British.

Decreeing two days of official mourning, the current mayor, Manuel Pérez Fenoll, said: “Benidorm has suffered the loss of the person who laid the foundations of the city we know today. He was the architect of a model praised and recognised around the world as an example to follow.”

How world capital of tourism was built on a bikini

According to legend, it all began with a bikini. The trickle of European tourists that first landed on Spanish shores in the 1950s were banned from wearing the racy new swimwear under the conservative social mores of the dictator Francisco Franco. Civil guards wearing patent leather hats patrolled the beaches getting tourists to cover up; one outraged British tourist earnt a fine when she slapped a civil guard in response.

So Mr Zaragoza caused an uproar in 1950s Spain when he signed a decree allowing the bikini to be worn on Benidorm’s beaches. The Roman Catholic Church began excommunication proceedings against him, “a kind of social death” in the Spain of that era, he later recalled.

Facing imminent dismissal from his post, Mr Zaragoza hopped on his Vespa, stuffed newspaper down his shirt to protect him from the cold and sped nine hours to Madrid to see the Generalísmo himself. The mayor must have been persuasive because days later he won Franco’s approval for the bikini and Benidorm’s development as a tourist resort.

“He was the only one who helped me,” Mr Zaragoza recalled in Giles Tremlett’s book, Ghosts of Spain. “He asked me how I had come, whether by train or airplane, and I said no, on a Vespa. That surprised him.”

Eight days later, Franco’s wife, Carmen Polo, appeared in Benidorm with the Minister of Governance and his wife in tow. Mr Zaragoza was given a pass to enter the dictator’s palace in Madrid anytime he wished, and Franco’s wife began to visit the mayor’s house for two weeks every year.

The Catholic Church dropped its efforts to excommunicate Benidorm’s mayor, showing that foreign tourism had the ability to trump its awesome power in the Spain of that time. Tourists began to arrive from Britain, Scandinavia, Germany and the Netherlands, and the town’s population grew from 1,700 to 70,000 today.

Some writers and historians say those tourists brought with them the seeds of change that ultimately undermined Franco’s four-decade dictatorship. “Without the bikini there, quite possibly, would have been no modern Benidorm and, in fact, precious little tourism at all,” Mr Tremlett wrote.

“At this stage, had Spain not welcomed it, the nascent package tourism could easily have put its roots down elsewhere in the Mediterranean.”

For better or worse, Benidorm became an early blueprint for Spain’s booming tourist industry. With its 330 spindly skyscrapers jostling for space and blotting out the sunshine, Benidorm also became a byword for ugliness, a hulking great eyesore sat atop on what had been a beautiful stretch of coast.

But many environmentalists now look at Benidorm wistfully in light of the sprawling developments of boxy chalets that have since been built in Spain. Greenpeace reckons that the country’s coast is disappearing under concrete at the rate of three football pitches a day.

Mr Zaragoza Orts began his working life as a bellboy in a Madrid train station, but clearly had a way with powerful people. His personal papers, donated last year to the University of Alicante, reportedly contained correspondence with Franco, Charles de Gaulle, the Argentine strongman Juan Domingo Perón and Otto von Habsburg.

He remained a staunch supporter of Franco until the end, even requesting one of the dictator’s last remaining statues for his garden after it was uprooted from a Madrid plaza three years ago. But he did come to wonder whether the uncontrolled expansion he helped set in motion had been the best thing for Benidorm.

“Sometimes I weep when I walk around and see what some streets have become,” he lamented recently.

Full story from travel.timesonline.co.uk

Few people actually enjoy financial planning. Whether we’re talking about applying for bank accounts, or setting up tax reduction arrangements, or researching, buying and selling stocks and shares, most people consider is a chore and keep putting it off. If you are quite new to Spain you’ll be tired of paperwork after sorting out the move, purchasing and doing up your house, registering for tax etc, and probably want to avoid any further big decisions for a while.

Others do not understand the merits of approaching a qualified and authorised financial adviser and either stick with whatever arrangements they had before they came to Spain or else try to sort out their finances alone. Any hesitation and/or failure to seek professional advice can be very costly, both annually (eg, if you are paying more tax than necessary) and in the future (if inflation has reduced your spending power) and possibly for your heirs too. Depending on your personal wealth level, with the right advice and structures in place you could save thousands of Euros over the years - even tens of thousands - in tax. And in the future you could have even more spending power than you do today, and not less as is often the case with retirees spending a long retirement in Spain.
Given this the time spent with a professional adviser can make a considerable positive impact on your future wealth.

Tax mitigation for you

If you are in employment there is little you can do to reduce income tax on your salary, unless the Beckham tax clauses apply which have limited applicability, but those with savings and investments often pay significantly more tax than they need to. Bank interest is always subject to income tax, regardless of where it is generated/received. Investments held in your own name are also subject to income tax and possibly capital gains tax. In Spain they are also liable to wealth tax. In many cases it is possible to significantly reduce the tax paid on these savings and investments by moving the capital into tax efficient structures like an insurance bond. Many people are amazed by the amount of tax they can save. It is often necessary to restructure your financial planning once you move to Spain anyway, since the tax efficient arrangements you had back home (for eg, ISAs, PEPs, TOISAs) are not tax free in Spain.

Tax mitigation for your heirs

The Spanish succession tax rules mean that if you die leaving assets in Spain, your heirs are likely to be liable to tax on their inheritance. Some provinces have introduced virtual exemption between spouses, but Spanish assets left to children will usually be fully chargeable. You will need to establish exactly how your regional rules apply to you. British expatriates often remain liable for UK inheritance tax, since it is based on domicile and not where you are tax resident. However, you appropriate planning you are often able to significantly reduce such tax liabilities for your heirs.

Maintaining the value of your money

Even if you are not looking to increase your wealth, you need to protect its value right through your retirement so that you have the same spending power in five, 10, 20 years time as you do today. The older you are, the harder it will be to cope with dwindling cash reserves, so you need to take steps today to prevent that happening. Unfortunately keeping money in a bank deposit account offers negligible protection against inflation, and retired people are hit the hardest by inflation. Inflation is causing significant concern at the moment, especially with high oil and food prices. In Spain it was 4.4% in February, compared with 2.5% 12 months ago. If inflation remains 4% over the coming years, it will reduce the spending power of €100,000 by 18% in five years; by 34% in 10 years and by 56% in 20 years.

Investment choices

The current economic climate and stockmarket performance is unlikely to be encouraging people to move their money from cash into the stockmarket. On the other hand, banks look a much less secure place than used to. Those already with investments may be wondering whether to amend their portfolio. To make matters worse, the Euro/Sterling exchange rate could be reducing your income.
All these issues mean that professional advice is more important than ever – sitting back and doing nothing may be detrimental. Asset allocation and diversification are key to helping your finances get through these difficult times. You don’t necessarily need to invest in equities, bond and certain international property funds may be better for you, and there may be lower risk investment opportunities you are not aware of.

Your UK pension

UK pensions are notoriously inflexible, there are restrictions on how you take your pension benefits; you have to buy an annuity before age 75; you cannot leave the balance of your fund to your heirs and your income will be suffering with the Sterling/Euro exchange rate. However, with the introduction of Qualifying Recognised Overseas Pensions Schemes – “QROPS” – in many cases it is now possible for expatriates who are no longer UK tax resident to transfer their pension out of the UK and avoid all these restrictions. Also, after five years of non-UK residency, your fund will no longer fall under the UK tax net, not even UK inheritance tax.

Full story from www.blevinsfranksinternational.com

There's been a fresh slew of articles in the press this week about the state of the Spanish property market following another construction company going into receivership. Journalists are wondering whether Spain is following the US into a sub-prime crisis of its own? For what it's worth, here's my tuppence-worth.

The hubbub surrounding the US sub-prime crisis has diverted attention away from a number of underlying problems which already existed in the Spanish property market. Yes, there's a credit crunch going on throughout Europe - some of it due to a knock-on effect of the US woes, some of it due to lending and spending patterns in individual countries. A credit crunch is also happening in Spain because it was already poised to do so, long before most of us learned what 'sub-prime' even meant.

In the boom years of the 90's, constructors could do no wrong in Spain. Developments sold out faster than they could build so banks fell over themselves to lend them money to build more. Constructors became one of the largest employers in Spain and accounted for a scarily large chunk of Spains' GDP - enough to attract attention and warnings from the ECB, OECD, IMG, UN ..

Such a building spree also spawned some of the less savoury practices of constructors, developers and local councils. Think Marbella corruption, Valencia land grab and Almeria demolition.

Fast forward to 2005/6 and we see a glut of newly-built low-end properties nearing completion in Spain. House price growth has slowed but these properties are still beyond the reach of most Spanish first-time buyers. For many foreign buyers too, Spain is no longer the cheap, sunny place in which to buy a property.

Still the development continues in 2005 with Spain starting 800,000 new-build properties - more than France, England and Germany combined.

For the last few years, Spains' economy has been hugely reliant on construction. Faced with warnings of this over-reliance, constructors responded by building even more and suggesting that the government assist them to purchase more land, more quickly and more cheaply so that they could build still more.

The interest rate hikes and high-risk lending that occurred in the US and Europe served to tip the property market in Spain over the edge - but it's been waiting to happen for a long time. Here's roughly what's happening at the moment:

1. There aren't enough buyers for all the newly-built properties in Spain. The large quantity of unsold properties means that some constructors cannot meet the interest payments on the money they borrowed to build them.

2. As constructors go into receivership, their employees join a growing number of unemployed and unemployable. Interest rates have also increased which means that mortgage payments and rents are increasing at the same time that there's less cash available to pay them.

3. Banks are now jittery about business lending to constructors and private mortgage lending.

4. A poor Sterling exchange rate against the Euro is suppressing much of the UK interest in Spain currently. While buyers from Euro-zone countries don't share that concern, they are seriously concerned by Spain's history of corruption and disregard for some basic human rights.

That's my understanding of the current situation in Spain - but it's not all doom and gloom.

First, there are property bargains out there - from developers and from people who must sell now for whatever reason. No, there isn't a wholesale drop in prices because most property owners are perfectly happy to sit tight and wait.

Second, this 'natural cleansing' is good for the overcrowded Spanish property market. Compared to the UK market, there are too many 'professionals' in the Spanish industry. My hope and expectation is that only the cream of the crop will survive the next two years.

Zapatero, the newly re-elected prime minister is now on a deadline to fix the property market in Spain. He needs to see the results in the next couple of years so that his supporters can feel warm and fuzzy about him and his PSOE party when it comes to election time again. He's vowed to attack the problems of social housing and building-related corruption.

A better regulated property market with a steady trickle of first-time-buyers is a better property market for everyone.

I think the government will acquire unsold newly-built housing at the developer fire sales and use them for subsidised housing. I think they'll take this opportunity to distance themselves politically from the economic stranglehold the constructors and developers have had for the last 30 years.

For most people, it's mostly good news. For property owners who aren't in any hurry to buy or sell it's business as normal. Very few Spaniards speculated on Spanish property with a view to making a fast profit anyway - so they'll hold on too.

The worst hit in the short term will be buyers of off-plan property who, for whatever reason, are on a fixed timeline to sell. More than likely, the developer will undercut private asking prices with their own unsold units - and that's assuming there are buyers available. New build starts have ground to a halt but more properties are coming on to the market every day as developers rush to complete so they can service their bank debt.

For the foreseeable future, in the low-end and middle of the market, where there is some imperative to sell, this will be a buyers market. At the high-end, it's business as normal because buyers and sellers are less likely to be reliant on credit.

Martin Dell, Kyero.com

Brits thinking about buying property abroad are wondering why the Pound has fallen so far against the Euro. Currency specialists, Moneycorp, say many factors are involved but at least two of them involve house prices in the UK and US.

Northern Rock came to grief in September when it could not borrow enough money in the wholesale market to finance its portfolio of mortgages. The queues of nervous depositors made investors wary about the UK financial system and, in turn, wary of the Pound.

Northern Rock’s problems had arisen because of nervousness about the US mortgage market where foreclosures and repossessions were adding to the real estate depression. The Bank of England foresaw serious knock-on effects for the UK economy and shared its thoughts with the media.

Investors were left with the idea that a slowing UK economy would mean tumbling interest rates, making Sterling progressively less attractive as a currency in which to invest. After four years of stability the Pound suddenly became a basket case.

Sterling has an unfortunate track record. In the last 20 years there have been a handful of incidents which have sparked sharp falls in the value of the Pound. The most famous was when Sterling’s ill-fated flirtation with membership of the European Monetary Union fell apart in the autumn of 1992.

The short term picture does not look good. When the Pound dropped through €1.38 at the end of last year it cleared the way for a further fall to €1.20, Sterling’s low point against the ECU in 1995. Technical targets are not necessarily realised but analysts would not be surprised if the Pound were to fall below €1.20.

Putting on the rose-tinted spectacles for a moment it is possible to imagine a different outcome. Sterling’s recent under performance has been because the Euro zone has acquired the reputation of being immune to the problems facing Britain and the States. But the fact that it has not suffered so far does not mean that it will never suffer.

If we see evidence that the European economy has problems of its own, investors will have to revise their blithe assumption that Euro interest rates will never ever go down. Such a development would level the playing field and give the Pound scope to recover some of its losses.

Real estate in Spain, or anywhere priced in Euros, is now more expensive for British buyers than it was in the first half of 2007. If the Pound really does fall below €1.20 those prices will go up further in Sterling terms.

For investors who have already taken the plunge it means an increase in the Sterling value of their investments. It also means more expensive holidays or reduced spending power from their pensions.

In six months’ time, Sterling might be in a better position than it is at the moment but maybe not by much. The Pound has taken a severe beating since September 2007, and the downward pressure has probably been overdone. Whether or not we see €1.20, there is almost certain to be a bounce. Only in the very worst cases (such as the Turkish Lira in the nineties or the Zimbabwe Dollar today) does a currency experience losses, never to return.

Planning your currency requirements can have a significant effect in reducing the uncertainty of volatile exchange rates.

Download the free Moneycorp currency guide.